Paleoconservative Observations

Trade Nationalism as Wedge Issue

Immigration reform is popular, but the impact of immigration is very uneven by region. The coastal states, large cities, Texas, California, and Florida are all impacted significantly. The impact is far less in Ohio, Michigan, Wisconsin, Pennsylvania, and Iowa. These states look like America circa 1960.

The reason there is less immigration in these places is complicated, but it’s partly economic: these states are on the downswing from their economic peaks. The general economic decline of the Midwest has a lot to do with its low immigration. There is simply less demand for labor, unlike the growing states of Florida, California, and Texas. While I think Trump’s immigration message helped him win in places like Florida, it may not have carried the day in the Midwest without another important message: his commitment to renegotiating trade deals to serve the interests of American workers.

The “Rust Belt” states were built on the manufacturing sector, and the manufacturing sector has been bleeding jobs since the 1970s. The jobs first went to Taiwan and Japan, whose managerial acumen and nationalist trade policies had a role, and this has accelerated after the opening of China’s markets and its low-cost (that is low wage) manufacturing sector in the 1990s. And some jobs disappeared altogether due to automation; while the impact of that may be somwhat inevitable, it is not the entire story. Workers are working and things are being built in Mexico, China, and elsewhere, and our workers used to do that work. There are jobs to be had in manufacturing.

Romney lost Michigan, Pennsylvania, Ohio, Iowa, and Wisconsin. Trump won them all. It was close, but he did it. And he did it because he communicated a radical message on trade that was quite contrary to GOP conventional wisdom. Both parties’ leaders have been united in their support for free trade orthodoxy since NAFTA. Outsourcing was seen as an acceptable cost of doing business, a consequence of economic efficiency. Obama with little compassion said “those jobs aren’t coming back.” Hillary promised to put coal miners out of work. And the tin-eared Jeb Bush said he wanted more millionaires, when most of these people would be happy with $40K a year. Those adversely affected by trade had no real advocate in either party, until now. These disaffected and demoralized voters, sometimes first time voters, responded as one would expect when someone pays attention to their concerns and problems.

These are not extremely conservative places, and lack some of the small government radicalism associated with the GOP strongholds in the South and West. But disaffected working class Democrats, who remained put off by the GOP’s traditional free trade message, were likely put off equally by the anti-white vibe emanating from the Democrats. These are hard-working, moderate, law-and-order people, who played by the rules, and rightly feel they have seen the American dream recede further out of reach. They’re worse off than their parents. They seemed to have no home politically, but a plain-speaking billionaire promised to fight for them, and they voted for him.

The case for free trade is perhaps the shakiest in all of economics. We know historically that many countries prosper with protective tariffs, and some of the best periods of U.S. growth and economic health were periods of high protective tariffs, such as the late 19th Century, the age of Standard Oil and U.S. Steel, or when we were an exporting nation, as we were in the devastation following the Second World War.

One of the sleights of hand of economists with their goal of increasing aggregate welfare is to treat the welfare of foreigners as identical to that of Americans. Thus trade has probably done a lot to create a larger middle class in Asia, and this benefits them as well as Americans in their capacity as consumers, and may even be on aggregate “wealth increasing,” but the “wealth redistribution effects” including lower wages and structural unemployment are treated by economists as a non-factor.

Economics is concerned with increasing aggregate welfare and is largely indifferent to wealth redistribution effects. But politics is not economics. There is an implicit value judgment in the very concept of nation-states to place the collective welfare of their citizens as being above that of other nation-states. Nothing in economic science requires this, but the science part of economics does not dictate how its teachings are applied. Indeed, many of a cosmopolitan bent are indifferent to the welfare of Americans vs. that of non-Americans, so long as the practice or policy is “wealth increasing,” but so what. This is ultimately a policy choice, and “cui bono?” should be a big part of that discussion.

The retort that trade restrictions are just a subsidy to some workers at the expense of consumers misses something important about jobs and what they mean. Nations are not just consumers. They consist of workers, families, and communities. A person without a job or the prospect of a new one makes that person lose purpose, that family lose security, and that community lose hope. We can afford more expensive things more than we can afford structurally unemployed people. Consider the recent news reports on rising death rates among middle aged whites. The root causes in alcohol and drug abuse, are themselves rooted in hopelessness from economic and social conditions.

Indeed, consumerism is completely secondary to the necessities of life, not least of which is the spiritual necessity of useful work to the self-image and self-confidence of a man with a family or who hopes to have one. Even assuming arguendo the price of more restricted trade is paying a few bucks more for TVs, towels, and trinkets, it is likely a worthwhile trade. As the Catholic Catechism states, “The development of economic activity and growth in production are meant to provide for the needs of human beings. Economic life is not meant solely to multiply goods produced and increase profit or power; it is ordered first of all to the service of persons, of the whole man, and of the entire human community. Economic activity, conducted according to its own proper methods, is to be exercised within the limits of the moral order, in keeping with social justice so as to correspond to God’s plan for man.”

There are other concerns with trade, including trade deficits, which tend to increase the power of our foreign creditors, and the fact that our trade policy with China has allowed them to accumulate vast wealth, which they are using to build a first class navy. That is, trade with friendly countries similarly situated–Europe, Latin America, free Asia–has fewer collateral and negative consequences than trade with hostile nations that are our geopolitical rivals. Indeed, I am less chagirned at NAFTA, because it is America’s interest that Mexcio remains stable and prospers. But China is the most important player; it’s super-low-wages have sucked jobs not only from the United States, but from Mexico too. Even if were less a military rival, the impact on jobs at home is reason alone to rethink trade. The legacy policy is hollowing out a huge portion of our country, leaving people too old to retrain to fend for themselves, or, worse, rendering them demoralized and expensive members of the dependent classes.

Trump has shown that the trade message allows for good optics from good outcomes. The recent news from Carrier Air Conditioners and Ford Motor Company are tangible successes, quite distinct from the usual statistics-based arguments in favor of free markets and free trade.

And, even if one does not buy all that, the legacy GOP message, well told by Romney, simply didn’t win an election against a very vulnerable opponent. It kept losing in Michigan and Pennsylvania, even in 2000 and 2004. Trump’s message was fundamentally nationalist on trade, immigration, and foreign policy, and it was reasonably popular. Indeed, it prevailed in spite of his unorthodox and controversial style, but perhaps also because of it. He talked like the people he aimed to help.

There is a lesson here to those opposed to leftism. You have to build a coalition, with some give and take by the different members of that coalition. Without the Upper Midwest, you likely cannot create a winning national election coalition. A modest deviation from free trade orthodoxy on nationalist grounds is a useful wedge, even if one views at as a sacrifice from good policy, which I personally do not.

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3 Responses

I agree that we need significantly more trade protectionism. On the other hand, the approach must be measured and gradual. In the short term, I think it should be a mix of incentives and threats to particular companies considering moving (such as have been employed with Trump’s recent successes), with limited tariffs being phased in over time.

Eventually, the tariffs will have to be significant and broad, as otherwise domestic companies will figure it out and just start holding the country for ransom with threats to move. But to suddenly implement a major tariff would likely result in major panic and disruption.

In other words, yes, but carefully and with tactful consideration of trade partners. I do not think it is something that can be achieved within one term, but when the sky does not fall, domestic support will ensure the process moves forward.

I agree with all that. Long term we need a modest tariff. Not one that destroys trade but one that protects jobs on the margins and raises some revenue. Also we need to tie the right to import with a comparable export trade. We should aim for zero trade deficit.

I recently read an article, I think on the Unz Review, that said (if I recall correctly) that the outsourcing of American jobs has resulted in a wealth transfer from American workers to the owners of capital of over $500 billion a year.